International bankruptcy: when and how do the French courts intervene?

By Yasmine EDDAM27 April 2025

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The increasing internationalisation of trade and the location of companies means that there are more and more situations where financial difficulties extend beyond the borders of a single country, particularly for regulated companies operating internationally. What happens when a French or foreign company with links to France finds itself in a situation of insolvency? Knowing whether a French court can intervene, and which law it will apply, then becomes an essential question for the company itself, its directors, but also its creditors and commercial partners. This article aims to clarify the rules determining the jurisdiction of French courts to open collective proceedings (sauvegarde, redressement or liquidation judiciaire) in an international context, as well as the applicable law and the way in which foreign bankruptcy decisions are dealt with in France. The focus here is on the French "ordinary law" rules, excluding the direct application of European regulations, which will be the subject of other publications.

When does a French court have jurisdiction?

In order for a French court to open insolvency proceedings against a company in difficulty with an international dimension, a criterion of connection with France must be established. The law and case law have defined several possible points of connection.

The main criterion: the company's head office in France

The most obvious criterion is the location of the company's registered office in France. Article R. 600-1 of the French Commercial Code specifies this point.

For a legal entity (a company), the competent court is the one within whose jurisdiction its registered office is located. Note, however, that this is not necessarily the registered office indicated in the articles of association (registered office). If this registered office is fictitious, i.e. if the effective management and the bulk of the activities take place elsewhere in France, it is the location of this "real registered office" that will determine the jurisdiction of the French court. It is possible for any interested party to prove that the registered office is fictitious, and this rule is considered to be a matter of public policy: a company cannot choose a fictitious registered office in order to avoid the court with normal jurisdiction.

For an individual (sole trader, liberal profession), the rule is simpler: the competent court is that of the place where the entrepreneur has declared the address of his business or professional activity.

Where the French court has jurisdiction on the basis of the registered office (actual or declared) in France, the collective proceedings that it opens have, in principle, a "universal" scope. This means that it covers all of the debtor's assets, including assets located abroad. The Court of Cassation has affirmed this (notably in the Banque Worms 2002). However, this universality has significant practical limits: its effects abroad depend on acceptance by the foreign legal systems concerned, which often requires a local recognition procedure (exequatur).

Setting up a secondary establishment in France

Even if the company's head office is located abroad, a French court may have jurisdiction if the company has a secondary establishment in France. Article R. 600-1 of the French Commercial Code refers to the "principal centre of its interests in France". Case law interprets this concept as the principal of its secondary establishments located in France (for example, a major branch, an agency or an office with a degree of autonomy).

The mere presence of this secondary establishment may justify the opening of collective proceedings in France, even if proceedings have already been opened in the country of the head office, as long as these foreign proceedings have not been officially recognised in France by an exequatur decision. The Court of Cassation has long confirmed this jurisdiction (judgment in BCCI Overseas, 1995).

As in the case of jurisdiction based on the registered office, proceedings initiated in France on the basis of a secondary establishment are also universally recognised (judgment in Khalifa Airways, 2006). However, here again, the real effectiveness of this procedure for assets located outside France (and in particular in the country of the registered office) will depend heavily on recognition by the foreign authorities, which is far from automatic.

Extension of proceedings: confusion of assets or fictitious status

Collective proceedings initially opened in France against a debtor can sometimes be extended to another person (natural or legal), even if the latter is foreign or has no registered office or place of business in France. Article L. 621-2 of the French Commercial Code provides for this possibility in two main cases:

Confusion of assets : If the assets of the principal debtor and those of another person are so intertwined that it is impossible to distinguish them (abnormal and constant financial flows, absence of clear separate accounts, etc.).
Fictionality : If the legal entity initially targeted by the proceedings is merely a front ("shell company") behind which another person is actually carrying on the business and holding the assets.

In such cases, the French court that initiated the first proceedings retains jurisdiction to order the extension. This is a powerful tool, particularly for apprehending the assets of foreign companies used to conceal economic reality. However, proving confusion or fictitiousness is often complex, especially in an international context. For this reason, in order to understand how European law facilitates the coordination of insolvency proceedings within a group of companies operating in several Member StatesIn view of the fact that this is a frequent problem in the context of international bankruptcies, our firm invites you to consult our dedicated article. Normal financial relations within a group of companies, for example, are not in themselves sufficient to characterise a confusion of assets and liabilities justifying an extension.

Other competence criteria (less common or discussed)

In addition to these rules of general law, it is important to note that in a in an international context (European Union), specific regulations determine the jurisdiction of courts and the recognition of insolvency decisions.

Historically, other criteria have been used to determine the jurisdiction of French courts.

La French nationality of one of the parties (claimant creditor or defendant debtor), based on articles 14 and 15 of the Civil Code, has long been accepted. However, its application in bankruptcy matters is now highly controversial and severely limited, or even excluded in the case of article 14 by a recent decision (Com. 12 June 2024). These "privileges of jurisdiction" are considered to be subsidiary (applying only in the absence of any other criterion of jurisdiction) and optional (they do not prevent the recognition of a foreign judgment if the dispute has a strong link with the other country).
The simple presence of goods or theone-off exercise of an activity in France were also sometimes accepted in earlier decisions as justification for jurisdiction. This approach is now widely regarded as dubious. Opening collective proceedings, which aim to deal with the entire situation of a company, on the basis of such tenuous links with France does not seem to meet the challenges and may be disproportionate. Conventional enforcement measures against assets in France are often more appropriate.

Which law applies if the French court has jurisdiction?

Once the jurisdiction of the French court has been established, the next question is which law will govern the collective proceedings.

The principle: French law (lex fori concursus)

The rule in private international law is almost universal: proceedings are governed by the law of the court that initiated them. This is known as lex fori concursus (the law of the forum, i.e. of the court, of the contest, i.e. of the collective proceedings). To understand how this law applies and the exceptions to it in the the specific context of cross-border bankruptcy in the EUSee our detailed article.

In practical terms, if a French court initiates a safeguard, receivership or compulsory liquidation, French law on companies in difficulty (essentially Book VI of the French Commercial Code) will apply to determine :

The precise conditions for opening a bankruptcy (cessation of payments, insurmountable difficulties, etc.).
The conduct of the procedure (appointment and powers of court-appointed representatives, observation period, verification of claims, etc.).
The effects of the opening judgment (suspension of individual proceedings against the debtor, suspension of legal and contractual interest, prohibition on payments of previous debts, etc.).
Possible outcomes (adoption of a safeguard or recovery plan, sale of the business, liquidation of assets).
Possible sanctions (liability for insufficient assets, personal bankruptcy, etc.).

This application of French law applies even if the debtor is foreign, the creditors are foreign or the contracts concerned are subject to foreign law.

Limits and interactions with other laws

The principle of lex fori concursus is not absolute. Collective proceedings opened in France will necessarily interact with pre-existing legal situations, such as contracts or guarantees, which are themselves governed by a law that is not necessarily French law.

French law recognises that bankruptcy law must sometimes be combined with other laws. For example :

The conditions for the validity of a security interest (such as a mortgage) taken over an asset located abroad will in principle be governed by the law of the place where the asset is located. However, its enforceability against French insolvency proceedings and its ranking in relation to other creditors will be determined by French law.
The conditions and consequences of termination of an employment contract, even if it occurs in the context of French collective proceedings, will continue to be governed by the law that normally governs the contract (which may be foreign law).

These interactions are complex and require a case-by-case analysis to determine precisely which law applies to which specific issue.

What happens if a bankruptcy has been opened abroad?

When insolvency proceedings have been opened abroad against a company with interests in France (assets, creditors, establishment, etc.), the question arises as to what effects these foreign proceedings can have on French soil.

Without recognition in France (exequatur)

As long as the foreign bankruptcy judgment has not been officially recognised in France, known as an "exequatur", its effects in France are very limited. French case law traditionally considers that in the absence of an exequatur :

The debtor is not considered to be divested of his assets located in France. He may continue to administer and dispose of them.
Creditors (even foreign creditors) can continue to take individual legal action against the debtor in France and take enforcement measures against his French assets.
Foreign receivers (or liquidators) may not take enforcement measures in France.
It is possible for a French court, if it has jurisdiction in accordance with the rules set out above (for example, if there is a secondary establishment), to initiate concurrent insolvency proceedings in France.

The foreign judgment does, however, have a certain existence: it can serve as proof of the appointment of the foreign liquidator, and the latter can carry out certain conservatory acts in France or apply for exequatur.

The exequatur procedure

In order for the foreign bankruptcy judgment to produce all its effects in France (in particular the divestment of the debtor and the enforceability allowing the foreign liquidator to act on French assets), it must obtain the exequatur of a French court (the Tribunal Judiciaire, not the Tribunal de Commerce).

The French court hearing the application for exequatur does not redo the foreign proceedings. Its review is limited to verifying certain conditions laid down in case law (Munzer, Cornelissen):

Indirect jurisdiction of foreign courts : The French court will check whether the foreign court was entitled to give judgment, particularly if the dispute was clearly connected with that country (for example, if the company's real registered office was there). The French courts are fairly liberal in this respect.
Compliance with French international public policy : The foreign decision must not conflict with fundamental principles of French law (e.g. rights of defence, principle of equality of creditors). This control is applied in a mitigated manner: there must be a "manifest" conflict.
Absence of fraud : The referral to the foreign court must not have been intended to fraudulently circumvent French law, which is normally applicable.

The effects of exequatur

If the exequatur is granted, the foreign judgment is recognised in France and acquires the authority of res judicata and enforceability.

In France, foreign proceedings produce the effects provided for by the foreign law governing them (divestment of the debtor, suspension of proceedings, etc.).
The foreign liquidator may then exercise in France the powers conferred on him by that foreign law, in particular to seize and realise the debtor's French assets (subject, however, to compliance with French procedural requirements for enforcement).
No new main proceedings may be opened in France against the same debtor.

One important point concerns the effective date of the exequatur. Traditionally, exequatur was only valid for the future. However, case law (Kléber(1986) admitted a certain retroactivity: the effects of foreign law (such as the suspension of prosecution) can sometimes be taken into account for acts that occurred in France. after the opening of foreign proceedings but before the exequatur decision. This retroactivity, although limited by respect for French public policy, introduces complexity and risk for third parties having dealt with the debtor during this interim period.

If your company or one of your business partners is faced with an insolvency situation with international ramifications, a a precise legal analysis is essential to determine the competent jurisdictions and the applicable laws. Our firm can help you see things clearly and defend your interests, whether you are a debtor, creditor or business partner. Contact us for a consultation.

Sources

French Commercial Code, in particular Book VI and articles L. 621-2 and R. 600-1.
Civil Code (historical relevance of articles 14 and 15).
Jurisprudence of the Cour de cassation (principles set out in particular in the following judgments Banque Worms, Khalifa Airways, BCCI Overseas, Kléber).

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